U.S. Job Market Returns to Modest Growth

After a tough December that saw 227,000 jobs lost, the labor market returned to modest growth in January. The U.S. gained 49,000 jobs last month, with education and professional and business services leading the gains. Although this month’s jobs growth was weaker than many would like it to be, there is reason to be optimistic that future months will see more significant job gains as the stimulus passed in December fully kicks in.

Getting Back on Track

While the U.S. has fewer jobs than it did in November, the January jobs report did present some reasons for optimism. This includes a slight drop in the unemployment rate, strong growth in education jobs, and falling unemployment claims.  The number of workers who have been unemployed for more than 6 months, which can be a significant drag on economic growth, has also not grown significantly since November. The current job situation has improved throughout January as federal stimulus measures take effect.

A Shot in the Arm

January’s job growth was a little underwhelming, but there is increased confidence that the fight to combat COVID is heading in the right direction. As of February 3rd, the U.S. had administered 36.7 million doses of various COVID-19 vaccines and cases of COVID have continued to decline after peaking in early January. The economic recovery will be driven by our ability to fight the virus and the latest developments should provide significant optimism as consumers feel better about returning to pre-pandemic spending.

A Ways to Go

While the U.S. has added an unprecedented 12.5 million jobs over the past 8 months, the job market remains 9.9 million jobs shy of the February 2020 peak. The unemployment rate is still almost 3% higher than it was before the pandemic. Labor force participation also remains lower than its pre-pandemic levels.

Growth by Industry

January saw positive growth in both the public and private sectors, but the strength of the job growth last month came from the public sector. The private sector added only 6,000 jobs in January, while the public sector added 43,000 jobs.

The professional and business services sector experienced strong job growth again in January, gaining 97,000 jobs thanks to an increase in temporary help services jobs (+81,000). The large number of temporary hires may indicate employers are hesitant to bring on new employees due to uncertain economic conditions.  Education-related sectors also saw major gains. The education services sector (+33,900), local government education (+49,000), state government education (+36,000), and private education (+34,000) all saw significant job growth in January. Information (+16,000), wholesale trade (+14,000), financial activities (+8,000), and other services (+7,000) also saw minor gains.

On the other hand, leisure and hospitality saw another monthly decline to start the year, with the industry losing 61,000 jobs in January, with accommodations and food services losing 37,700 jobs and amusements, gambling, and recreation losing 26,900 jobs.

The trade, transportation, and utilities sector also contracted in January, losing 50,000 jobs. General merchandise stores (-38,300) and couriers and messengers (-13,700), which have been a source of strength for the economy throughout the crisis, accounted for most of the losses in the sector.

Manufacturing took a step back, losing 10,000 jobs in January. Education and health services (-7,000) and construction (-3,000) also declined slightly at the beginning of the year. 

Help is On the Way

Although this month’s jobs picture was mixed, there is optimism that more support is on the way. The economy in early January still had not seen all of the benefits of federal stimulus and the peaking coronavirus cases likely muted any optimism that business owners and workers might have felt. In spite of these headwinds, the U.S. was able to add jobs. As vaccine distribution advances, stimulus efforts take effect, and cases continue to decline, we should begin to see job growth accelerate.

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The division of Economics and Public Policy at Zions Bank informs and educates employees, clients, and the community-at-large by providing insight and analysis on issues related to local, national and global economic trends as well as federal banking policies. The primary goal of the Economic and Public Policy team is to help individuals and businesses understand important issues that can impact their daily financial decisions. For more information and analysis, please visit www.zionsbank.com/economy.

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